Trials and Tribulations of a Young VC in Southeast Asia

James Chan is chief hustler at Silicon Straits, and concurrently principal at Neoteny Labs. He is currently kicking the cans around on a couple of fronts, some of which you might hear about soon.

It’s not easy to be a young venture capitalist (VC) in Southeast Asia.

I know it because I’ve been one for the past three years at Neoteny Labs. Fred Wilson, who is managing partner at Union Square Ventures and an investor in our fund, would readily agree. As he wrote earlier this year, “startups are a great place to be in your 20s and 30s. VC is a great place to be in your 40s and 50s.” I pored over Fred’s article the first time I saw it, and read it countless times in the weeks after. His article has become my muse as I ponder about my next few years.

I never asked to become a VC. It was a series of locally optimal decisions I made, interspersed with serendipity, which got me to where I am today. My interest in startup ecosystems as a junior officer with the Industry Development division of the Infocomm Development Authority of Singapore (IDA) spurred me to take up Peng T. Ong’s offer to join his skunkworks at Infocomm Investments in mid-2007. I spent two years at Infocomm Investments helping venture-backed startups set up software engineering teams in Singapore. In February 2009, YC co-founder Paul Graham shared his views on jumpstarting the startup scene in a city in a blog post; we had been executing an equivalent strategy a good 16 months earlier, in the hopes of accelerating Singapore’s startup ecosystem development. Making a career out of venture capital was the furthest thing on my mind given that I still had three more years before I completed my scholarship bond with the Singapore government.

It was serendipity that brought Joi Ito and me together at his Creative Commons office in San Francisco, and serendipity that reunited us in Singapore when he had a long Singapore layover in mid-2009. But I get ahead of myself; more on that in a bit.

I found it disingenuous to call myself a VC when I only made a grand total of one venture investment in my two years at Infocomm Investments. I figured I needed to learn from the pros, and after being rejected by Vertex and IDG Southeast Asia, joined the Singapore office of Walden International for what would have been a two-year private sector stint. I ended up spending five months with Walden before breaking my scholarship bond with IDA and raising the cash to pay off my bond’s liquidated damages, so I could take up Joi’s offer to work at Neoteny Labs with him.

If it is hard for entrepreneurs to raise risk capital in Southeast Asia, it is even harder for VCs to raise capital for their fund. I had no track record and could not have done it without Joi. We raised US$5 million and invested in 24 startups in the two years after May 2010, leading 13 investments in Southeast Asia and US and co-investing in 11 others. I represented the fund on the boards of eight of our investments. Some of our portfolio companies appear to have traction, while four have since ceased operations. I expect a few to run out of cash in the months ahead, and hope for the rest to do a lot better.

Youth has its benefits, but I’ve since learnt that being a young VC in Southeast Asia is a lot harder than if you’re a young VC in the US. Kevin Kinsella, who is founder and managing director of Avalon Ventures and also an investor in Neoteny Labs, recently asked me how good I thought my crystal ball gazing was. It didn’t take long for me to admit that I’m much improved than when I first began, but can probably still do better. There’s good reason why Kevin is on to his tenth fund at an initial close of US$201.6 million only two years after closing Avalon’s 9th fund, while I’ll most likely not be able to secure investor interest for funds of any sort at all. Kevin is now in his 60s, while I’m only 31.

We were at the Jersey Boys’ gala night at the Marina Bay Sands two weeks ago and I was only able to recognize three of the 20-odd songs that were performed, a stark contrast to Kevin’s enthusiastic head-nodding and feet-tapping throughout the Broadway musical. Kevin’s 30-odd extra years goes beyond his musicality, giving him a keener awareness of how trends will play out over time, the wisdom of lessons gleaned from past mistakes and being a better judge of character. Prospective Southeast Asian investors would probably feel that their money is in safer hands when the general partner has more white hair and decades of experience under his or her belt.

Like Fred said, I made my fair share of rookie mistakes over the past three years. I should have spoken less and listened more. I should have taken less offense and not fought with entrepreneurs over meaningless things.

There are some aspects I think young VCs can be better at without needing extra decades under our belt, but others remain firmly beyond our yoke of control. There’s a lack of critical mass of individuals who’ve made enough money from tech in Southeast Asia and are passionate enough to plough their time and money back into the ecosystem. Entrepreneurs bemoan a series A funding gap, while accelerators and VCs work hard at raising money from investors with little to show for their efforts. Things are getting better, but it will take longer still. In the absence of proven funding and exit pathways, we must continue to get stuck in, seeking out and amplifying the positive deviance within the Southeast Asian tech ecosystem.

Thank you for sharing this honest article.I’ve heard this line before… “If it is hard for entrepreneurs to raise risk capital in Southeast Asia, it is even harder for VCs to raise capital for their fund.”Really puts things into perspective. Sometimes I think we forget that VCs have to raise money from someone else too.

Great post and thanks for sharing. I think you do have several advantages – being able to relate to younger founders, and younger target audience (if that is the startup’s target market). Being able to show what you don’t know is just as powerful as showing what you do know!

The condor here is disarming! The scene’s not much different in India either. Venture investment is just 5 years old perhaps and angel/seed (professional) funds are not known. Ones that are there have to prove a lot/have the same staying power as the entrepreneurs they back.It’s good to know that we (entrepreneurs) are not the only one at the trenches!